Apple leads techs higher; Dow suffers small loss

A weaker-than-expected factory-orders report dismays traders, but the blue chips drop 17 as short-covering trims losses. Facebook falls below $27 on an analyst 'sell' rating. Apple recovers from steep loss. China's services sector expands.

By Charley Blaine Jun 4, 2012 12:59PM
Charley BlaineUpdated: 2:30 a.m. ET Tuesday

Given how badly things looked at, say, midnight ET or early this afternoon, a finish that basically left the market with small gains is a victory. Except that the risks the market faces -- turmoil in Europe and a slowing economy at home -- are still in place and could weigh on markets on Tuesday.

The Dow Jones industrials ($INDU) were down slightly, but the  Standard & Poor's 500 Index ($INX) finished with a small gain. The tech-heavy Nasdaq Composite Index ($COMPX) ended solidly higher as Apple (AAPL) rebounded to $564.29, up $3.30.

Short-covering was the likeliest candidate to explain the rebound that saw the Dow fall as many as 83 points before rebounding and even briefly showing a small gain. In short-selling, an investor borrows shares from a brokerage and sells, hoping to profit later when he buys the shares back and returns them to the brokerage.

Utility stocks were mostly higher. Sodastream International (SODA) shares were up $1.73 to $31.97. Amazon.com (AMZN) and Google (GOOG) were leading technology higher.  Chesapeake Energy (CHK) shares were up 94 cents to $16.52 after the company said it will replace four directors, a nod to activist shareholder Carl Icahn, who owns a 7.6% stake in the company.

The Dow finished down 17 points to 12,101. The S&P 500 was ahead -- barely -- to 1,278. The Nasdaq, however, rose 13 points to 2,760. The Nasdaq-100 Index ($NDX) finished up 19 points to 2,478.

Article continues below.
The market opened modestly higher today on reports that European leaders were considering a master plan to bring budgets, banking and political systems under tighter control.

But the rally was snuffed out by the realization that considering a plan doesn't mean it's going to happen any time soon. Then, the U.S. government said April factory orders were weaker than expected,  and a report from the Institute for Supply Management's New York Chapter showed activity pulling back.

China's non-manufacturing purchasing managers index fell to 55.2 in May from 56.1 in April. The report meant that China's services sector is still expanding but is doing so at the slowest pace in more than a year.

While short-covering probably is the biggest cause for today's rebound that came in the afternoon, there was also news that finance ministers of the United States, Canada, Germany, France, Britain, Japan and Italy will hold a conference call Tuesday to discuss European financial crisis.

The news came as Germany sent signals that it would eventually be willing to lift its objections to ideas such as common euro-zone bonds if other European governments were to agree to transfer further powers to Europe.

There's also new speculation that the Federal Reserve may decide to start a new effort of asset purchases to stimulate the economy.

That, however, is a very big "if." Many European countries, especially France, are loathe to give up any sovereignty. And one wonders if the emotional wounds of World War II may be an issue as well.

Tuesday's market features the Institute for Supply Management's Non-Manufacturing Index for May plus non-manufacturing indexes from the European Union and Germany.

Futures trading suggests a solidly higher open.

One reason for the uptick: China's services sector expanded at its fastest pace in 19 months in May. In a report released Tuesday morning, HSBC said the gain was driven by new business and improvements in confidence about the future. HSBC's China services Purchasing Managers' Index rose to a seasonally adjusted 54.7 in May, up from April's 54.1. However, the result remained below the long-run trend of 56.7,

Starbucks setting up a fight with Panera Bread?
After the close, Starbucks (SBUX) said it was buying Bay Bread, the parent of the French bakery chain La Boulange, for $100 million in cash.

La Boulange operates 19 cafes in the San Francisco Bay Area. Starbucks is also hiring chef Pascal Rigo to help update menus at Starbucks stores as well as at La Boulange.

Investors saw the deal as a signal Starbucks plans to go after Panera Bread (PNRA). Panera shares fell $1.67 to $140.22 in regular trading and an additional $2.22 in after-hours trading.

Starbucks closed up $1.75 to $53.90.

Separately, shares of discount retailer Dollar General (DG) were off $1.22, or 2.5%, to $47.27 after hours. The share-price decline was due to the disclosure that key shareholders, including Kohlberg Kravitz Robers & Co. and Goldman Sachs, were reducing their stakes in Dollar General.

Dollar General earned 63 cents on revenue of $3.9 billion in the fiscal first quarter. That was up from 45 cents in earnings on revenue of $3.45 billion a year ago. Analysts had expected 60 cents in earnings and revenue of $3.83 billion.

Facebook sees more selling
Facebook
(FB) tried but failed to finish above $27 after falling to as little as $26.44, a new low since its May initial public offering. Sanford Bernstein initiated coverage on the stock with a "sell" rating and a $25 price target. The shares closed down 82 cents to $26.90.

"It is difficult to argue for owning the stock today," wrote Bernstein analyst Carlos Kirjner in a research report today.

A near-term slowdown in sales growth will fuel investor concerns about full-year 2013 sales, Kirjner wrote. The deceleration may "prove to be a temporary setback if, over time, Facebook manages to improve monetization of its inventory, both PC- and mobile-based, and maximize the value of social advertising," Kirjner wrote.


Facebook is developing tools to let children younger than 13 use the site with parental supervision, a move that may rekindle privacy concerns, The Wall Street Journal reported Sunday. 


Another potential issue for Facebook: Google is expected to launch a new small-business marketing product that leverages Google+, Offers, Wallet and other products. 


Google was up $7.61 to $578.59.


Energy prices -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Crude oil (-CL)

$83.98

$83.23

-2.95%

-15.03%
(per barrel)











Heating oil (-HO)

$2.6269

$2.6279

-2.82%

-9.86%
(per gallon)











Natural gas (-NG)

$2.4150

$2.3260

-0.29%

-19.20%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.6707

$2.6568

-1.91%

0.50%
(per gallon)











Brent crude 

$98.85

$98.43

-2.96%

-7.94%
(per barrel)











Retail gasoline

$3.5850

$3.5900

-0.97%

9.43%
(per gallon; AAA)












The jobs report still weighs on the market

Despite the gains, the market is vulnerable at best and still reeling from the May jobs report, which showed only 69,000 jobs added to the economy. Industrial and financial stocks are the weakest sectors.

JPMorgan Chase (JPM), Caterpillar (CAT) and General Electric (JPM) were the laggards among the 30 stocks. Home Depot (HD), up 80 cents to $48.76, was the leader.

JPMorgan was down 93 cents to $31 because of European concerns and because of a report in The New York Times that a group of investors warned the banking giant a year ago that its risk controls were weak.

The Dow's loss was its fourth in a row. The blue-chip index is down 1% for the year. The S&P 500 is off 9.9% from its closing peak of 1,419.04 on April 2 -- and just below the threshold of 10%. If measured from 1,422.38, its intraday high on April 2, the index is off 10.1% and thus in a correction.

There is no ambiguity about the Nasdaq. The index is down 11.6% from its peak on March 26.

There is talk the market has further to fall. The uncertainty in Europe appears to be affecting business in the United States, and there's talk the S&P 500 could fall to 1,100. However, there is an important support level that has tended to bring in buyers at 1,125.

Things could be worse. Germany's Xetra Dax Index ($DE:DAX) is off 16.5% since peaking in March. France's CAC-40 Index ($FR:PX1) is down 17.8%. Britain's FTSE-100 Index ($GB:UKX) is down 11.8%. Japan's Nikkei-225 Index ($JP:N225) has fallen 19.1%.

Spain's Ibex 35 Index ($ES:IB) is off 41% in the last 11 months. The index was up 165 points to 6,240 today, however, after a report on Spanish unemployment showed modest job gains. But the unemployment rate was still 24.4%.

Gold settles lower; crude oil rebounds
Crude oil (-CL) reversed course and settled up 75 cents to $83.98 a barrel in New York. It was above $84 in electronic trading. All on a day when it had fallen to as low as $81.21. Brent crude also was rallying, hitting $98.68 a barrel, up 25 cents after dropping to $95.63 in overnight trading.

The retail price of regular unleaded gasoline was averaging $3.585 a gallon, according to AAA's Daily Fuel Gauge Report. That's still up 9.4% for the year but down 8.9% from its peak in early April.

Gold (-GC) settled down $8.20 to $1,613.90 an ounce. Silver (-SI) dropped 50.5 cents to $28.007 an ounce. Copper (-HG) slipped to $3.307 a pound.

The 10-year Treasury yield was up slightly to 1.524% from Friday's at 1.467%.

Short hits from the markets -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0700%

0.070%

0.00%

600.00%
5-year Treasury note 

0.681%

0.620%

1.49%

-17.95%
10-year Treasury note

1.527%

1.467%

-3.42%

-18.39%
30-year Treasury bond

2.571%

2.540%

-3.78%

-11.01%
Currencies











U.S. Dollar Index

82.661

82.973

-0.56%

2.66%
British pound

1.5411

1.5380

-0.02%

-0.82%
(in U.S. $)

 








U.S. $ in pounds

£0.649

£0.650

0.02%

0.82%
Euro in dollars

$1.25

$1.24

1.11%

-3.54%
(in U.S. $)

 








U.S. $ in euros

€ 0.800

€ 0.804

-1.10%

3.67%
U.S. $ in yen 

78.31

78.10

-0.31%

1.57%
U.S. $ in Chinese

6.35

6.37

-0.45%

0.42%
yuan











Canada dollar

$0.964

$0.963

-0.42%

-1.70%
(in U.S. $)

 








U.S. dollar 

$1.038

$1.039

0.42%

1.72%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,613.90

$1,622.10

3.18%

3.01%
(per troy ounce)

 








Copper (-HG)

$3.307

$3.314

-1.74%

-3.75%
(per pound)

 








Silver (-SI)

$28.0070

$28.5120

0.90%

0.33%
(per troy ounce)

 








Wheat (-ZW)

$6.2775

$6.1225

-2.49%

-3.83%
(per bushel)

 








Corn (-ZC)

$5.6800

$5.515

2.30%

-12.14%
(per bushel)

 








Cotton 

$0.6778

0.6885

-5.66%

-26.07%
(per pound)

 








Coffee

$1.6080

1.5985

-1.32%

-29.98%
(per pound)

 








Crude oil (-CL)

$83.98

$83.23

-2.95%

-15.03%
(per barrel)










 

128Comments
Jun 4, 2012 1:56PM
avatar
Ever wonder what it might be like to live in a world without consequences? Well, we've had a good look at it for more than 20 years now. How did it work out for you? What did you get away with? And how do you plan to hang onto it?
Jun 4, 2012 1:56PM
avatar

I love it when Traders are 'dismayed'...

Jun 4, 2012 1:55PM
avatar
Stocks can't catch a break? Give us a break! Catching a break presumes luck, and not fundamental structural economic policies. There is no recovery because the economic policies favored by leftists are extremely flawed (and that is saying it nicely). Get the government (all governments) out of the way, and free-market forces will right the ship. Stop giving hand-outs to all the moochers (Greece, Spain, France, Italy, etc), and reward producers, workers and consumers with lower taxes and incentives to produce, work, and consume.
Jun 4, 2012 1:51PM
avatar
I've said it before; compressive deflationay contraction. Whether you believe it or not makes no difference, it is here. We need to forget about 'return to growth' ;it will not happen. Ever. If we don't manage contraction it will manage us.
Jun 4, 2012 1:50PM
avatar
For the jobs report, they do not tell you that the majority of those jobs in the last two months that were created were part time jobs. Maybe we can work two part time jobs to get  40 hours a week and then multiply that by taking 3 x more part time jobs at the minimum wage of $8.+/hour so we can average $50 k/year wages.
Talk the Joe Biden plan -- no sleep for everyone!!!

Jun 4, 2012 1:49PM
avatar

The slowdown in China-Bad News on the Jobs front- Bad news from Europe are just the beginning. Because of the failure to pass a Budget last year, $600 Billion in manditory cuts are going to be made to our defense budget in January of 1013. This will cause major and widespread cuts and layoffs among defense contractors and the multiplier effect will further cripple our economy.

Oil may continue to fall, but look for a production cut from OPEC to try to keep the price from falling below $80 per bbl. I doubt that even this will stop it from reaching $75 because of the continued decrease in demand because fo the slowdown.

 

I am still looking for DOW 10,000 by the election. This may bring about a change in the White House, but unless major changes are made to our spending/debt problem not even that will stop the inevitable.

Jun 4, 2012 1:47PM
avatar
You can bet on a steady decline in the markets UNTIL after the election. I'd say buy Oil, but with all of America to soon be unemployed, and once the Republicans make minimum wage illegal, no one will be able to afford it, nor anything else. We shall soon find ourselves in debtor's prisons that soon shall be more than full and Constitutionally legal, if one side has their way and say.
Jun 4, 2012 1:46PM
avatar

These ****s on Wall Street crack me up.  They take taxis and limos to and from work and don't have a clue what the rest of the country goes through.  In April they tell us how were going to be paying $4-$5/gal for gas by Memorial Day and drive the price of oil through the roof.  Then when people pull back and employers don't hire anyone, they run around crying the sky is falling.

 

Maybe if they'd pull their heads out of their asses and see how the rest of the country suffers everytime they speculate just to line their pockets the economy might actually improve.  But then they'd drive the price of gas up and everything would come crashing down. 

 

Send these idiots to the cheapest store, Wal-mart, with $50 and tell them to buy food for a week.  After they lived off cheap TV dinners and bolagna for a week and had to ride a bicycle to get around, their asses wouldn't be so fat.  That's when things would actually change for the better.

Jun 4, 2012 1:39PM
avatar

So lower sales are a surprise?  When you don't have the money or worried about spending money on widgets...you don't purchase them...

 

Pretty Simple

Jun 4, 2012 1:35PM
avatar
AT $83.23 A BARREL, GAS SHOULD BE BELOW $2.50 A GALLON. BUT THEN THERE WOULD NOT BE MUCH GOOD TIDINGS LEFT OVER  TO PASS AMONG THE OIL CEO,S AND TO FILL  THE WAR CHESTS FOR THE POLITICIANS OIL SUPPORTS, WHO REMAIN EERILY SILENT ON THIS SUBJECT.
Jun 4, 2012 1:34PM
avatar

To LostonEarth...

Should have said YES WE WILL!!

Jun 4, 2012 1:33PM
avatar
Odds are good lost. It may make 11,00 before the end of the month, maybe even 10,000. IT has been propped up by bogus employment numbers for a long time.
Jun 4, 2012 1:24PM
avatar

Can we get bellow 12,000 today?

 

YES WE CAN!

 

 

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